Tuesday, February 8, 2011

Huffington Deal Raises Question: What Site Will Be Sold Next?


In agreeing to buy The Huffington Post for $315 million, AOL is putting what appears to be a significant premium on the ability to attract and build a community of readers.

Yet as more and more advertising dollars flow to the Web and to mobile devices, demand for popular and prolific online content producers like The Huffington Post, is rising. The market for online advertising is expected to increase 14 percent, to $51.9 billion, this year, according to the research firm Borrell Associates.

With that kind of growth, the deal for The Huffington Post is expected to raise the bar for other independent online media companies whose audiences have surged with the help of social media platforms like Twitter and Facebook.

Speculation is now turning to what prices others could fetch should they ever go on the block. Among the biggest is Gawker Media, home to a collection of popular sites, such as its flagship property and technology blog, Gizmodo, which attracts about 19 million users a month, according to comScore. Glam Media, a group of beauty and fashion sites geared toward women, boasts 87.8 million visitors a month.

The three-year-old Business Insider, something akin to a business version of The Huffington Post, with its mix of breaking original content and aggregation, attracts 3.5 million visitors a month, comScore says. And companies like AOL and Yahoo have been on the prowl for content providers.

“Right now, the macroeconomic turnaround and the explosive growth in mobile, is causing Internet companies to accelerate their investments and there’s a question of what is content,” said Ben Schachter, an analyst with Macquarie Securities. “Companies like AOL and Yahoo are in a battle to make themselves relevant.”

For that reason, analysts barely blinked at a valuation for The Huffington Post that by most measures was a lofty one. The price is 6.3 times The Huffington Post’s projected revenue of more than $50 million for this year. That’s more expensive than the $25 million AOL paid last September to acquire TechCrunch, which claims to generate about $10 million in annual revenues.

If one uses AOL’s projections for revenue growth and costs savings in 2012, the price for The Huffington Post comes to 10 times earnings before interest, taxes, depreciation and amortization or Ebitda, wrote Mark S. Mahaney, an analyst with Citigroup. “Not cheap, but not outrageous for a relatively high quality asset with strong top-line growth, current profitability and margin expansion potential,” he wrote.

Read the entire issue here: www.NYTimes.com

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